Impacts of the CSU on the State of California

Whenever new income is injected into an economy, it starts a ripple effect that creates a total economic impact that is larger than the initial influx. This is because the recipients of the new income spend some percentage of it within the region, and the recipients of that share, in turn, spend some of it within the region, and so on. The total spending impact of the new income is the sum of these progressively smaller rounds of spending within the economy. This total economic impact creates a certain number of jobs, called the total employment impact, and also creates tax revenue for state and local governments, which is called the total fiscal impact.

By treating the total expenditures of the university system and its affiliated entities as “new spending” in the economy, the total spending, job, and fiscal impacts of the university can be estimated.

In this assessment of the California State University’s economic impact, all CSU-related expenditures, including the expenditures of the university itself, those of its auxiliary organizations, and those of the students who moved to California or specific regions throughout the state to attend a CSU, have been calculated. The economic modeling package, IMPLAN, was used to calculate this total economic impact. This methodology, and the model used, is consistent with similar studies conducted across the nation and ICF’s 2004 CSU economic impact assessment.

Direct CSU-related expenditures for wages and salaries capital equipment and supplies; student spending on textbooks, meals, and housing; and an array of other items related to its educational mission for the 2008-09 fiscal year totaled $7.96 billion. This total includes:

$5.48 billion in university expenditures on wages and salaries, services, supplies, and related ongoing needs;

$987 million in average annual construction and capital expenditures;

$1.29 billion in expenditures by campus auxiliary organizations such as bookstores, campus restaurants, foundations, research institutes, and other entities. This category captures the bulk of student expenditures for books, on-campus food purchases, etc.;

$203 million in additional off-campus spending by out-of-state students who are in California to attend the CSU. Expenditures on a statewide basis for housing and other living expenses by resident students were assumed to exist with or without the CSU and therefore were not considered an incremental benefit. On a regional basis, residential expenses were counted for out-of-area students as being an incremental benefit to that region.

The total spending impact of this $7.96 billion of direct CSU-related expenditures is estimated at nearly $17 billion. This level of spending activity supports almost 150,000 California jobs annually1. In addition, over $995 million in annual taxes was generated in 2008-09 for the state and local governments. Simply stated, the CSU generates $2.13 for each dollar of direct spending from all sources, up from $1.83 in 2002-03. Assessing the impact of CSU-related expenditures confirms that the university is a large and significant institution in California with a spending profile and an economic impact to match.

Expenditures alone, however, provide an incomplete picture of the impact of the university in terms of what it actually does—provide an affordable, accessible quality university education to tens of thousands of Californians who would not otherwise attend a university in the state and obtain a bachelor’s or master’s degree. One of the ways that the value of a CSU education can be estimated is by focusing on the higher earning power of university graduates. The U.S. Census Bureau has estimated that bachelor’s degree holders earn, on average, nearly $1 million more than high school graduates2 over the course of their working life. This means that a university education has a powerful economic impact, and the increased earning power of university graduates needs to be considered in a complete accounting of the CSU’s impact on California.

In 2008-09, the 1.96 million CSU bachelor’s and master’s degree alumni working in California earned an estimated $122 billion in income. While not all of this $122 billion is attributable to their university education, roughly $42.1 billion of this total represents the enhanced earnings power that is attributable to their CSU degree.

This particular impact of the CSU also has indirect and induced effects on spending, jobs, and taxation. When CSU-related expenditures and the enhanced earning power of CSU alumni impacts are considered together, they produce a combined direct annual impact of $50 billion in the California economy. When the indirect and induced impacts of this direct impact are modeled in IMPLAN, the total spending impact of the CSU is $70.4 billion. This level of economic activity supports roughly 485,000 jobs annually in the state and generates $4.9 billion in annual tax revenue for state and local governments.

Lastly, the CSU contributes to the state significantly in terms of in-kind service across an array of industries. The CSU was the first higher education system in the country to establish a system office supporting service learning and community engagement, the Center for Community Engagement (formerly the Office of Community Service Learning). According to the Center, roughly 50 percent of CSU students participate in community service, up from 40 percent 10 years ago. Systemwide, that constituted roughly 32 million hours of service in 2007-08, which led to an in-kind economic impact of $624 million.3

The magnitude of the CSU’s economic impact on California can also be viewed in relation to the state’s annual investment in the university system. In 2008-09, the state investment in the CSU (operating and average capital appropriations) totaled $3.12 billion. For every dollar the state invests in the university, the impact of CSU-related expenditures alone creates $5.43 in total spending impact. When the impact of the enhanced earnings of CSU graduates is included, the ratio rises to $23 in total spending impact for every dollar the state invests in the CSU. These findings show that the CSU has a massive economic impact on California with state and local governments annually getting back more in taxes than the state’s annual investment in the CSU, making the CSU increasingly valuable.

1 Despite an increase in the overall magnitude of CSU spending impacts, the total number of supported jobs reported is fewer than what was reported in the 2004 analysis due to national, economy-wide increases in worker productivity. Increased worker productivity implies for each dollar invested, more worker output is produced, but by fewer employees. More information on these calculations can be found in Appendix B.

2 Bachelor’s degree holders that work full-time, year-round throughout their career can expect to earn an average of $2.1 million over their lifetime, compared to $1.2 million for workers with a high school diploma only. Source: U.S. Census, The Big Payoff: Educational Attainment and Synthetic Estimates of Work-Life Earnings.